The Evolution of Public Sector Expenditures: Changing Political Priorities in Argentina, Chile, Paraguay and Peru

This article examines central administration functional expenditures for four Latin American countries over the last twenty years. A detailed review of fiscal accounts was conducted in each country, with greater concern for inter-country consistency in public sector accounting techniques and functional area definitions. The study reveals large errors in military expenditure data published by international sources. Our improved and disaggregated database shows, first, that Defense expenditures are the single largest (and most volatile) functional outlay, often greater than all public sector social functions combined. Second, from 1969 through 1987 (except in Peru) the Defense function grew faster than Health or Education, with Defense generally crowding out these social expenditures. This conclusion directly contradicts the dominant position in the literature regarding Less Developed Country social expenditure crowd-out by Defense. Third, military regimes tend to spend more on Defense (and a higher average share of the nomina) than do civilian regimes. Here a growing number of counterassertions in the literature are based on faulty military expenditure reporting. Moreover, military regimes spend less on social areas than do civilian regimes. And lastly, Police shares of the nomina are inversely related to the country's level of development.